Poland’s Strong Consumption and Investment Point to Robust Growth with Mild Inflation Outlook
Ukraine Peace Deal Hopes Weigh on EUR Inflation Swaps as Real Rates Hit New Highs
Germany’s Economy: Three Years of Stagnation With Only Limited Signs of Recovery
Commodities Move on Geopolitics and Weather as Oil Rises, Gas Falls, and Nickel Faces Supply Risks
USD Overvaluation Persists as Geopolitics Dominate and JPY Faces Intervention Risks
This report is prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 3.0.
â– This year we have observed a slowdown of the Company’s revenue dynamic to expected 30% yoy from 96% in 2021 which implies that the management target results (assuming a 70% revenue yoy growth) will not be achieved. There are two main reasons for this; namely (i) insufficient training and slower performance of field engineering teams handling the presale and post-sale services (internal factor) and (ii) a delay in purchase decisions taken by some clients and a decrease in a value of the first contract which are related to the economic slowdown (external factor). The management declares that the dominating internal factor is being addressed and the effectiveness of field engineering teams should not limit growth in 2023.
â– A new issue in 2023/2024? In August the Company carried out a private placement of shares within authorized capital and collected PLN 38.3 million for further development. These funds should enable the Company to continue optimal development for a year and a half (until 1H24), we believe. Therefore, we expect another issue not later than in 1H24.
â– The Company informed that to-date it signed 15 new contracts this year, which implies a 36% increase vs the analogical period of 2021 when it acquired 11 new contracts. Usually the yearend is particularly busy (clients tend to close their budgets) and we expect an inflow of new contracts till the end of 2022.
â– Sales funnel value skewed slightly upwards. DataWalk informed that on September 14 a sales funnel value stood at c. US$ 25.3 million (including c. US$ 12.6 million in the US market and $ 12.7 million in other markets) which reflected a slightly rising trend of the sales funnel value, nonetheless we would like to see stronger growths which could support expectations of higher future growth dynamics.
â– 4Q22E. Based on our FY revenue forecast in the amount of PLN 40.0 million, we expect 4Q22 revenues to reach PLN 14.2 million (up 31%/ 85% yoy/ qoq).
â– Risk to financial forecasts. High. Financial forecasts for DataWalk are encumbered with a high level of uncertainty given the early stage of the Company’s development and a relatively immature industry it operates in. During the last conference the management explained that the Company’s target for 2023 was a growth of revenues by at least 50% yoy (earlier they assumed 70% yoy). In consequence, we also lower our expectations related to revenues.
â– Valuation. Our target 12M EFV drops by 32% to PLN 107 per share (from PLN 158 per share), mainly on the back of (i) the revenue forecasts decrease, (ii) the peer multiples lowering by c. 50%, and (iii) valuation horizon forward shift.
â– Recommended action. For us, DataWalk remains an attractive growth company suffering temporary problems related to sales processes and unfavorable macro environment. Given this current negative market sentiment towards the growth companies with high needs for external funding, we maintain our recommendations: LT fundamental Hold and ST relative Neutral.
Analyst: Tomasz Rodak, CFA
GPW’s Analytical Coverage Support Programme 3.0
